For Nigeria to attract foreign direct investments (FDI), it must create the right environment and appropriate fiscal incentives to out-compete currently preferred destinations of foreign capital like China, India, Vietnam, among others, Johnson Chukwu, group managing director, Cowry Asset Management Limited, has said.
According to Chukwu, FDI will go to a country with a stable macro-economic policy environment with low or moderate inflation, stable interest rates, stable or predictable exchange rates, easy access to foreign exchange and minimal capital controls.
In his presentation at the February 2022 bi-monthly forum of the Finance Correspondents Association of Nigeria (FICAN), held in Lagos last week, Chukwu observed that investors were interested in a large and skilled labour market, relatively free labour of less union and government control.
He noted that Nigeria recorded $1.44 billion inflow of FDI in 2015, $1.028 trillion recorded in 2020 as against $340.55 billion in 9 months 2021, which according to him, is a far cry from those of other countries in the region
“Investors gear their foreign direct investments toward economies where they have the highest potential for profit and the least risk. As such, the dent of the social unrest to the image and perceived risk of long-term capital investment would mean that the country will struggle in attracting the much-desired long-term finance needed for accelerated growth and enhanced job opportunities,” he said.
Speaking further, he detailed reasons why the Nigerian government’s investment in capital projects will be low this pre-election year, stressing that the country needs appropriate policies to attract FDI.
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The securities dealer revealed that because of the US Fed’s normalization exercise, the interest rate will be high globally. He, therefore, projected that the government may not borrow at the international market nor will there be sufficient liquidity to be borrowed from the local bond market in order to finance the 2022 budget deficit.
As such, Chukwu said that the Nigerian government will do minimal capital investment this year and more political expenditures, especially on activities that will keep the voters happy in order to get their votes.
According to him, though the government will pay salaries and other overhead expenses, the private sector will smile as some sectors will have good patronage.
The sectors are advertising, printing and designs, blogging, the media through adverts; food and beverages, breweries and people in the fashion industry, comedians and musicians.
